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Q&A: LLP self assessment tax returns

In our weekly Q&A series from Croner Taxwise, tax consultant David Woolley explains the ins and outs of HMRC requirements when filing annual tax returns for a new limited liability partnership whose accounts straddle different tax years

12 Nov 2019

Croner Taxwise

Q. A new limited liability partnership (LLP) client incorporated on 18 October 2018 and is due to produce its first trading accounts to year end 31 October 2019. The LLP and its members (all individuals) have been registered under self assessment, but what figures need to be entered on the 2018/19 LLP tax return, and are estimates acceptable?

A. As there is no accounting period ending in the 2018/19 year, HMRC would prefer the LLP to apportion actual figures (from 31 October 2019 accounts/tax computation) for the period falling into the tax year ending on 5 April 2019, as per the guidance in HMRC's SA850 Guide (page PTRG9).

Alternatively, it is acceptable to simply enter the details for the full period to 31 October 2019 as adjustments can then be made on the individual members’ personal tax returns.

However, delaying submission of the 2018/19 tax returns until you have prepared and finalised the accounts to 31 October 2019 will give you a smaller window in which to complete and submit the tax returns on time. Late return penalties can be expensive, especially where partnership returns are involved.

Therefore you could either submit a 'provisional' return or change the accounting date. A provisional return has conditions which are outlined on page PTRG8 of the SA850 guide.

Remember that the LLP members’ tax returns will also be provisional returns and so ensure that full details are provided to HMRC in the returns so that they are not rejected - see page TRG14 of the SA150 Guide.

Alternatively, change the LLP’s accounting date to say 31 March 2019 (remembering to notify Companies House of the change using form LL AA01) if you consider this may be easier.

The information you have not provided is when the LLP actually started trading. Even with the best intentions, creating an LLP and hitting the ground running as a trading entity from day one of the incorporation is very rare.

The 2018/19 self assessment tax return (SATR) should show the trading results and trading period of the LLP as this will affect the basis periods for the individual members and will affect the quantum of their profit shares.

For example, if the trade commenced on 1 December 2018, then the first trading period starts with this date, not 18 October 2018.

The basis periods of each LLP member will then run from 1 December 2018 to 5 April 2019. Unless you change the accounting period to 31 March 2019, you should ensure that the first period of trading covers a full 12 months of trading, otherwise the 2019/20 tax returns cannot be finalised without the next set of accounts being made available.

Continuing the above example, accounts to 31 October 2019 would only cover 11 months of trading and so would be insufficient to determine the assessable 2019/20 profits for each partner.